Shandong LPG Market Performed Well in Early 2023
According to SCI’s data, civil-use LPG and C4R2 prices in Shandong went up during the New Year’s Day holiday, as most market participants adopted bullish attitudes to downstream demand. In the short term, the positive expectation for downstream will probably underpin the LPG market in Shandong, so it is estimated that LPG prices in Shandong will remain firm.
Civil-use LPG and C4R2 prices in Shandong rose moderately before the New Year’s Day holiday and further advanced during the holiday. As of January 3, 2023, civil-use LPG prices in Shandong increased to RMB 5,100-5,250/mt, up RMB 275/mt or 5.6% from that before the New Year’s Day holiday. Meanwhile, C4R2 prices in Shandong reached RMB 6,400-6,500/mt, up RMB 710/mt or 12.4% from that before the New Year’s Day holiday.
In recent days, LPG prices in Shandong fluctuated downward, mainly influenced by the downstream demand. Given the decline in residential travel, the overall gasoline consumption went down, and the civil-use LPG demand waned. Meanwhile, the international LPG prices moved downward, and the international crude oil prices hit a new low, weighing down China’s LPG import costs and exerting bearish impacts on the overall market sentiment. Therefore, civil-use LPG and C4R2 prices in Shandong declined.
Before and after the New Year’s Day holiday, the international crude oil prices rebounded, and the decline in January CP was limited. Moreover, the demand for gasoline gradually improved, and most market participants adopted bullish attitudes to the LPG market, stimulating LPG prices in Shandong to rebound. Therein, the daily C4R2 price increment even reached RMB 400-500/mt.
After the New Year’s Day holiday, civil-use LPG prices further rose, and the overall market trading atmosphere performed well. Meanwhile, C4R2 prices trended flat, but the overall market trading atmosphere waned.
In the future, it is estimated that the international crude oil prices will fluctuate upward, and the international LPG prices may go up, lifting China’s LPG import costs.
In terms of the market supply and demand fundamentals, most refineries in Shandong run steadily, so it is predicted that the overall LPG supply in Shandong will be relatively stable. Moreover, the overall will probably improve gradually with more travels. Market participants adopt bullish attitudes to operating rates of downstream deep-processing units, driving up the demand for civil-use LPG and C4R2. However, given the profit losses at deep-processing enterprises, the increment in LPG prices may be limited.
Besides, the price spread between propane and civil-use LPG enlarged, supporting the civil-use LPG market. Moreover, both the increment in retail prices and the export quota release exerted bullish impacts on gasoline market. Given the bullish factors, it is estimated that the overall LPG market in Shandong will remain firm. Downstream users may show resistance to high-priced C4R2 resources in the wake of notable price increment, so the C4R2 prices will probably go down. Market participants will probably adopt cautious attitudes to the LPG market before the Spring Festival holiday, as downstream users may replenish stocks and upstream refineries are likely to cut inventory preferentially.
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